Why This Matters

For state policymakers and others in the economic development field, understanding how economic outcomes differ across states can offer lessons for fostering future growth. Of course, income alone does not determine a family’s prosperity, but it does offer a snapshot of economic growth.

What We Found

In general, inflation-adjusted incomes in Western, mid-Atlantic, and New England states have grown the most since 1970, while incomes in Midwestern states have grown the least. Utah saw the greatest percentage growth in median income, whereas West Virginia was the only state to see median income fall.

Previous research has linked a number of factors to state and regional economic growth, including public education spending, entrepreneurship, population growth, and even weather. Because our work looks at income more narrowly than overall economic growth, some of our findings diverge from these past studies.

In our analysis, we find the following:

• A state’s educational attainment is the most important factor associated with income change. There are several potential reasons for this association: increasing educational attainment could lead to increased incomes for state residents; higher paying jobs could attract people with higher educational attainment into these states; and strong collegiate programs could entice out-of-state students who then stay after graduation.
• An increasing share of a state’s foreign-born population is positively associated with income growth. This could be because immigration leads to economic growth, immigrants seek out growing areas, or both.
• State sales and income taxes, whether higher or lower, had no association with changes in median household income.
• States with colder temperatures and higher property taxes saw greater median income growth, contrary to conventional wisdom.

Further, the effects of deindustrialization have varied widely by region. While New England states that once relied on textile manufacturing jobs have managed above average income growth since 1970, Midwest and Southern states that relied on heavy machinery and auto manufacturing experienced below average income growth. Additionally, the westward migration of coal and natural gas production has affected some states more than others— changes in these industries affected incomes in Appalachian states more than in Western states.

Overall, the findings of our analysis likely justify states’ focus on education spending and workforce development while suggesting that lowering tax burdens is less effective at stimulating income growth. Moving forward, state policymakers and others seeking to grow or attract new industries in their region will want to consider whether those jobs support higher wages to ensure that all families in the region can thrive.

ABOUT THE DATA

In this analysis, we look at the median household incomes of states between 1970 and 2023 using US Census Bureau decennial census data from 1980 to 2010, one-year American Community survey data for 2023, and IPUMS microdata for 1970. We measure median household income in 2024 dollars for all years. We break ties in rank on state median household income with mean household income. The 1970 census did not ask about college degree attainment, so we consider those who completed at least four years of college as a proxy.

We examine trends over a 53-year period to better understand sizable and durable shifts in the economic landscape of the US. We then look at how socioeconomic trends relate to change in household income. It is important to note that incomes can rise either because the state’s residents are experiencing a wage increase or because of resident migration—both are areas of focus for state economic development policy.

Rachel Marconi, Wesley Jenkins, and Lauren Lastowka contributed to the creation of this data visualization.